Italy’s Conte admits defeat on budget, presents new plan to EU

Yesterday the Italian Prime Minister Giuseppe Conte had a crucial one and a half hour meeting at the Berlaymont with President Juncker, Vice President Dombrovskis and Commissioner Moscovici. [HOSLET/EPA]

In the one and a half hour meeting at the Berlaymont, the Italian delegation presented the Commission a new set of proposals that amend the 2019 budget law currently under discussion in the Italian Parliament.

The main offer Italy brought to the table brings the country’s budget deficit to 2.04% from 2.4% in earlier drafts, confirming that Rome has negotiated on targets and budget balances as an Italian government spokesperson told EURACTIV.

“We made a serious and reasonable offer,” Conte said to the press after the meeting, adding that negotiations will continue in the coming weeks.

The European Commission has no plan to start a war with Italy over its budget, Commission President Jean-Claude Juncker said a day after a working dinner with Italian Prime Minister Giuseppe Conte on Saturday (24 November). But Rome confirmed that the main reforms included in the disputed budget will stay unchanged.

The Commission acknowledged the “good progress” made by Italy on the budget plan and will now evaluate the proposal in the coming days, an EU spokesperson said after the meeting.

Commission experts need time to go through the proposal because it was sent to the EU executive only a few hours before Conte and Tria landed in Brussels.

Avoid the infringement procedure

Asked by reporters if Italy could still avoid the opening of the infringement procedure, Conte said that he would not have accepted such a mandate if he didn’t consider it feasible to strike a final compromise.

Italy risks fines and stricter monitoring from the Commission, as well as an adverse reaction from the markets, if the EU triggers the disciplinary procedure.

Conte also said that the Italian government will not budget on the two most controversial issues, the pensions reform and the universal income.

“We are not betraying the trust of Italians,” he said, adding that the Italian economy will grow more than expected and the structural deficit will fall in the coming years.

Italian Prime Minister Giuseppe Conte has attempted to open a dialogue with the European Commission in an attempt to calm things down over Italy’s “unprecedented” breach of fiscal rules, but has also warned that there will be no step back on the draft budgetary plans.

But lowering the deficit/GDP from 2.4% to 2.04% means generating around €7 billion in cuts or new revenues.

Conte announced that the government had decided to sell more state assets than initially planned in order to raise new revenues.

Conte flew back to Rome following the meeting but will return to Brussels for Thursday’s (13 December) European Council.

The European Commission first sent a letter to Finance Minister Tria in October, arguing that the Italian blueprint represented an “unprecedented breach” of the Stability and Growth Pact.

Italy refused to change its budget which was then rejected by the EU executive. A slightly changed new version was not enough to convince the Eurogroup or the Commission.

On Wednesday (21 November), EU economics commissioners Valdis Dombrovskis and Pierre Moscovici called for the opening of an excessive decisive procedure against Italy.

“With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability,” Dombrosvkis warned.

Italy’s public debt, which stood at 131.2% of GDP in 2017, is the Commission’s “key concern”.

On 29 November also EU governments’ representatives in the Economic and Financial Committee, an advisory group of the EU Council, agreed with the Commission that Italy’s budget does not comply with the debt-to-GDP criterion of the Stability and Growth Pact.

Italy’s deputy Prime Minister Luigi Di Maio said he was confident about ongoing talks with the European Commission over the country’s budget, despite a fresh recommendation by EU government representatives on Thursday (29 November) to open an excessive deficit procedure against Italy.